Mediterranean drought leads to spike in olive oil prices

The drought that hit major olive producers around the Mediterranean has had a significant effect on consumers all over the world with the price of extra virgin olive oil surging by nearly a quarter this year.

Olive oil production in Greece, Italy, Tunisia and, to a lesser extent, Spain is expected to decrease in 2017 sharply.

“Italy is terrible, Greece is terrible, and Tunisia is terrible. Can you imagine if Spain had also been down sharply?” said Panayotis Karantonis, director of the Athens-based Greek Association of Olive Oil Processors and Packers, as quoted by FT.

The International Olive Council (IOC) expects global output to fall 14 percent in this year, while in Italy production may be halved in the 12 months to September.

Greece will be down 20 percent and Tunisia 17 percent, while Spanish output is likely to face a drop of seven percent.

The limited supply along with the surge in prices has already reined in demand for olive oil in Europe. However, demand in Australia, China and Brazil remains robust with imports increasing rapidly.

According to experts, poor weather, as well as climate change, has had a negative impact on olive output in countries on the Mediterranean.

“We have had bad weather affecting production three years out of the last five,” said Vito Martielli, a grains and oilseeds analyst at Rabobank, the Dutch bank that specializes in food and agriculture financing.

The expert added that there are supply problems about every six to seven years.